Around one in five employees with degrees earn less than those educated to GCSE level, figures have shown.
According to statistics released by the Office for National Statistics (ONS) on Wednesday almost one million people fall into the 'not in education, employment or training' (NEET) category. The research, conducted between October and December last year, also shows one in five graduates earns less than employees who only holds A-levels or equivalent.
Overall, graduates are still more likely to earn more than those who did not progress to further or higher education. The statistics, based on employees between 22 and 64, show the pay gap is closing. The figures were compared to those from 1993, when there were twice as many employees without a degree or equivalent qualification. But the ONS drew attention to the numbers of people aged 50 to 64 when the survey was conducted in 1993 who were less likely to continue into higher education due to the system at the time.
Degree-educated employees were earning 85 per cent more at the close of last year than those who did not gain qualifications past GCSEs. This is compared to 95 per cent more in 1993.
The institute for public policy research (IPPR), an independent think tank, analysed the figures released by the ONS and revealed the rise of young people classed as NEETs is the biggest since 2000.
Associate director for IPPR Dalia Ben-Galim said: "Compared with the same period last year, there are now 119,000 more 19 to 24 year olds our of both work and training, representing a rise of 18 per cent."
The analysis by IPPR showed the north west of England had the biggest rise of NEETs - 36 per cent. The east of England went up by 17,000 (a rise of 27 per cent) and London went up 19,000 (a rise of 20 per cent). All the increases are above the national average.
Mr Galim added: “These figures confirm that the Government is not doing enough to support young people. The planned expansion of apprenticeships is clearly not enough and the government needs to provide more places in Further Education colleges and a job guarantee for every young person out of work for more than a year.”
The statistics show there are now 119,000 more NEETs than there were during the same period last year.
Labour's shadow education secretary Andy Burnham said: "These figures show that the Tory-led government is being far too complacent about getting young people back to work or into training, and risks leaving the next generation behind. Putting young people on the dole is a waste of money and a waste of their potential.
Burnham blamed the government's slashing of funding for career services and scrapping the education maintenance allowance (EMA) for making it harder for young people to succeed.
He added: "For the first time there is a risk that the next generation will do worse than the last."